Fide analyzes the normalization of U.S.-Cuba relations.

On September 15th 2016, FIDE held a session where the normalization of relations between the U.S and Cuba was discussed. The session was moderated by Hermenegildo Altozano, presented by Robert Muse and counted with the presence of a qualified group of assistants from the economic and judicial public and private sector.

The session was initiated by Hermenegildo Altozano, Partner in charge of the energy and natural resources practise in the Madrid office of Bird&Bird and a recognized expert in foreign investments in Cuba, by introducing Robert Muse as one of the most relevant experts in the relations between the U.S and Cuba and U.S extraterritorial legislation in a time where many opportunities to invest in and trade with Cuba are emerging. Hermenegildo emphasized the importance of the announcement by Barak Obama and Raúl Castro in December 2014 where they stated the reciprocal interest in initiating the normalization of U.S-Cuba relations. This announcement has opened a significant opportunity for Spanish and worldwide companies to develop strategies to invest in Cuba in a new scenario. It is very important to truly understand the meaning of normalization and all the elements involved to predict how this normalization process will continue with the new presidential elections.

Following the initial introduction to the topic, Robert Muse highlighted the importance of understanding the history of the normalization of the relations between the U.S and Cuba in order to analyze the complexity of the situation. The origin of these relations started when U.S citizen, Alan Gross, was being held prisoner in Cuba charged with criminal offenses as his purpose was to access the internet via satellite. In the U.S he was portrayed as a humanitarian Jewish citizen with highly qualified information. The risk of an U.S citizen being held prisoner for a long time in Cuba is what prompted the conversation between the U.S and Cuba to normalize the relations. The first thing on their agenda was to open embassies in their respective countries and in fact, there is now a U.S embassy in La Habana and a Cuban embassy in Washington D.C. The administration of President Barak Obama began a set of regulatory amendments targeted to empower and engage Cuban citizens by facilitating travelling. Since the Helms-Burton Act in 1996, U.S policy covered various aspects related to U.S-Cuba activity. Firstly, since the missile crisis in 1962, the expropriation of Cuban corporate property became a matter of national security and sanctions have been imposed to any trade related activity. After the Soviet Union collapsed in 1991, these sanctions took on a different rational towards the economic activity in Cuba. U.S programs to empower Cuban entrepreneurs were started as a better way to have democratic reforms under the presidency of Barak Obama. The normalization of U.S-Cuba relations is a very important challenge for president Barak Obama as this will probably be his legacy as the U.S president for 8 years. President Obama is under the influence of three significant persons: his wife Michelle Obama, the national security advisor and UN ambassador Susan Rice, and family friend from Chicago, Valerie Jarrett.

Next, the conversation steered towards determining what led to the Cuban normalization. In this context Robert Muse explained that Hilary Clinton wrote a book about her time as Secretary of State where she mentioned the relations with Cuba. She stated that the embargo was counterproductive and that it was not helping the U.S. In fact the embargo or blockade tends to prop the so called "Castro regime" because it gives them a reason to blame all their economic problems in Cuba on all the sanctions U.S has been implemented in Cuba. Hilary believes that the U.S should remove the embargo and normalize relations. Hoping that Hilary is the next president, Hilary will aim to normalize relations between the U.S and Cuba and she will continue on the base of negotiations that have been done until the present day. If Donald trump gets elected president of the United States nobody knows what will really happen to the normalization of U.S-Cuba relations since his failed attempt to meet Fidel Castro in 1994 when Cuba was visibly deprived. Robert Muse wrote a booklet in 2013 called The New Normalization Booklet published by Americas Society where he explains the “How-To” for the normalization of U.S-Cuba relations.

Next, Robert Muse discussed the effects that US-Cuba relations have on Spanish Companies. There is fear that the U.S will displace Spanish companies due to closer proximity of US to Cuba, however the normalization of US-Cuba relations can be good for Spanish companies in many aspects. The regulations were published in January 2015 and the first official announcement of the normalization was made in December 2014. The first step taken was the elimination of restrictions on U.S. citizens visiting Cuba. What before required special license to travel to Cuba, it has now become a general license where U.S. citizens can obtain the license if they qualify in any of the general categories. It has now been expanded to any family member of the traveler that qualified for a general licence. This has led to an increased U.S tourism in Cuba as before the rules changed, approximately 50,000 U.S. citizens travelled to Cuba in 2014 and it has now grown to 200,000 U.S. visitors. Furthermore, this is high-end tourism leading to a significant investment in the hospitality sector. In regards to Spanish companies, which are by far the biggest industry in the hospitality sector in Cuba, they are doing very well and every indication says they will continue to do well. There are five main areas where Spanish companies can take advantage of the normalization of U.S.-Cuba relations:

1.- Hospitality Industry. Increase in the tourism from the U.S. means benefit for the hospitality industry. Even though, Starwood who owns a number of hotels including WestIn and Sheraton, has announced an agreement to manage four hotels, Spanish managed hotels are better located and will continue to do well in the hospitality industry.

2.- Internet communication and telecommunications. Cuba resents the threat the U.S. poses for telecommunications because of a possible attempt of subversion from the U.S. and therefore, they are reluctant to collaborate with them. Improvements in this sector for the U.S. will not happen until relations have significantly improved. Spanish companies will continue to be well positioned in telecommunications.

3.- Importation of Cuban goods into the U.S. Now, only products of Cuban entrepreneurs can be exported to the U.S. Department of Commerce has a list of items and they include any edible and drinkable products. This offers opportunities for Spanish companies to identify Cuban producers and export their products to the U.S.

4.- Banking. There are some rule changes in this sector that are being implemented. There is an example where Cuba wanted to buy fish from Chile but the money got frozen because the electronic fund transfer was made in US dollars. This type of transfer goes through the U.S. for a microsecond and if the U.S. detects the involvement of Cuba the transfer is frozen and the money seized. Some of the rule changes now state that transfer does no longer have to be frozen nor the money seized, the receiver cannot simply reject the transfer. Regarding the trade with Europe, Cuban can now use the U.S. dollars freely to trade. Electronic bank transfers can now be done through Spanish banks in Cuba by running the electronic bank transfer through any American bank and the transfer can get all the way through.

5.- Terrorism and extraterritorial jurisdiction. Cuba has been on the list of State Sponsored Terrorism since 1982 until recently as Obama has taken it off the list. However, U.S. claims extraterritorial jurisdiction on anything manufactured entirely or partially in the U.S. and in this manner, the U.S. asserts jurisdiction over Spanish companies. To exemplify this, if a Spanish company wanted to import wind turbines into Cuba but because more than 10% of the components were from the U.S. they could not be imported into Cuba, regardless of the country of origin. The percentage has now been raised to 25% and the importer does not need a license.

Furthermore, the U.S. will view favorably any application to export to Cuba U.S. technology that offers benefits in protecting the air and marine environment of Cuba, specifically renewable energy. Spanish companies can identify technology that uses renewable energy, get the license, and export it to Cuba. Moreover, Spanish companies can build off their expertise in Cuba faster since with the U.S. everything has to go through their embassies and the process is much slower. Also important, the Chief Commercial State Department at the Washington D.C. embassy recently announced that U.S. companies can have physical premises in Cuba. Spanish companies have been in Cuba for many years and have experience with the procedures. Spanish consultant lawyers such as Hermenegildo Altozano can help these companies find U.S. technology, license it and export it to Cuba to build these premises. The U.S. falls behind and they are recommended to find a Cuban-American interlocutor in Florida. However, there is much to do in understanding the factors that have led to the normalization since it is much more than just cultural problems.

Regarding travel, the U.S. has resumed commercial flights to Cuba. There is a vast deep well of U.S citizens who want to travel to Cuba and there are many organized programs through the Smithsonian institution for example where educated people sign up. In September 2015 U.S. administration disclosed a new rule allowing certain companies to have a physical presence in Cuba. These companies could export authorized goods to the U.S. Furthermore, If you are certified you can lease the premises in Cuba, renovate them, employ Cuban citizens and they can even domicile a U.S. national to manage the premises. As an example, McDonalds can have a retail outlet in Cuba because it is an authorized exporter of food products. They can have a warehouse, allowed to package and have an outlet. One of the restrictions of the agricultural sector is that employees must be payed in Pesos. An ambitious Spanish fast food companies can join venture with U.S. companies and start to retail food products and securing premises to do so. Congress Department announced further changes to the export regulations in 2015 allowing general license for Cubans to import building materials and tools to renovate privately owned buildings. More specifically, there is a historical preservation law where U.S nationals can engage in historical preservation activities in Cuba. Spanish companies can join venture with U.S nationals and import building materials into Cuba and sell them to their counterparties as long as they are privately owned. Lastly, U.S. companies may now offer carrier services, vessels or airplanes and they could even build a terminal. Balearia, an important Spanish ferry company, could build infrastructure in Cuba under a general license.

To conclude the presentation, Robert Muse emphasized the numerous opportunities that Spanish companies have to invest in Cuba and how Spanish experience puts Spanish operators ahead of the U.S. since the normalization of their relations with Cuba need further understanding and improvement.

Hermenegildo Altozano opened a productive debate where the participants discussed the exercise of US extraterritorial jurisdiction in relation oil upstream activities in deep waters of Cuba and the policies in connection with the technology, as well as the due diligence procedures needed in the banking sector and the likely future scenario of the trade and investment relations between Spanish companies and Cuba.